It is difficult to understand why Indian IT firms which create tens of thousands of jobs in the United States are being viewed with increasing suspicion by the Barack Obama administration. The rate of visa rejections has gone through the roof and is showing no signs of improvement. These are surely testing times for Indian IT in its largest market.
India?s information technology (IT) and business process outsourcing (BPO) industry appears to be sharing a dichotomous relationship with United States?its largest business partner. On one hand, Indian companies are increasingly making investments in the US while their government for certain inexplicable reasons appears to be rejecting larger number of Indian visa applications.The $100 billion Indian IT & BPO industry which derives around 60% of its revenue from the US market through a mix of outsourcing, offshoring and onsite business.
The National Association of Software and Services Companies (Nasscom), in its recently released report??India?s Tech Industry in the US? has underlined the important contributions made by the Indian industry to the American economy.
Some of the highlights are: Over 2,80,000 jobs are being supported by Indian companies in the US, around 2,00,000 jobs for locals are supported by Indian companies in the US, investment of over $5 billion through 128 acquisitions in the US and finally the industry has contributed over $15 billion towards the US treasury.
Nasscom President Som Mittal believes that this trend is only going to increase in the coming years. ?With Indian companies engaging in more value add work, the overall contribution will only rise,? he says.
The Indian companies which earlier largely relied on the business model of outsourcing and offshoring are now increasingly making their direct presence in the US market to enhance the comfort and trust levels of their customers.
Mittal says that business dynamics are changing and the work is increasingly becoming of higher value addition requiring a more direct presence of the Indian companies.
Top tier Indian companies like Tata Consultancy Services (TCS), Infosys and Wipro have set up their development centres in the US and are engaging further with US academia to tap into the talent pool. One of the recent addition to this list is Bangalore-headquartered sub one billion dollar IT services firm Mindtree which has announced its plans to open a development centre in Gainesville, Florida and expected to bring about 400 new jobs.
Krishnakumar Natarajan, CEO, MindTree Limited ?on the rationale for opening the US centre, says, ?There are many factors, but the first and most important is that our clients want us to have this offering so they can source work onsite, offshore and onshore. We also will use this centre to recruit, train and deploy talent available locally to execute work for our global customers as as service Fortune 500 companies in South East US.? He further says, ?It is a win-win for all.?
Asheesh Raina, principal research analyst, Gartner, says that there are multiple advantages any Indian company can accrue by expanding into the US. It helps in generating local employment, enhances brand image and not being seen as somebody who takes away jobs, breaks down many barriers and most importantly, it makes immense business sense in getting better quality of work with larger volume from its customer base. Raina feels that for any Indian company which wants operate on a global level, it certainly helps in having a strong direct presence in the US. Recently, Infosys also announced a joint programme with Wayne County Community College District (WCCCD) for a software engineering boot camp to train and tap into technical pool in the Detroit region of Michigan in the US. This 18-week programme will train entry level software engineers with a job fair to follow.
Similar initiatives have also been undertaken by other Indian IT majors like Wipro and TCS.
However, along this upbeat sentiment of the Indian IT industry of increasing its reach within the American economy, there are certain dark clouds creating a sense of unease for the sector over contentious issue of visas. The Indian IT industry largely relies on the L-1 and H-1B visas issued by the US government to execute the various projects in the onsite locations. But, certain studies have shown enough evidence that Indians are unjustifiably being denied these visas for inexplicable reasons.
The National Foundation for American Policy (NFAP), a non-profit public policy research organization focusing on trade, immigration and related issues has found some disturbing evidence against India companies. In one of its research papers released recently, it has found that data obtained from US Citizenship and Immigration Services (USCIS) reveals that the agency has dramatically increased denials of L-1 and H-1B petitions over the past four years (2008-2011), harming the competitiveness of US employers and encouraging companies to keep more jobs and resources outside the United States. Data indicate much of the increase in denials involves Indian-born professionals and researchers.
Further, research from NFAP on the country specific data on new L-1B petitions indicate that USCIS is more likely to deny a petition from an Indian-born professional than nationals of other countries. The denial rate for Indian-born applicants for new L-1B petitions rose from 2.8% in Fiscal Year 2008 to 22.5% in FY 2009, a substantial increase that resulted in many employers being unable to transfer their employees into the United States to work on research projects or serve customers. In comparison, the denial rate for new L-1B petitions for Canadians rose from 2% in FY 2008 to only 2.9 % in FY 2009. ?Even the Denial rates for H-1B petitions increased from 11% in FY 2007 to 29 % in FY 2009, and remained higher than in the past for H-1Bs at 21% in FY 2010 and 17% in FY 2011.
Though, these higher rejection rates and scrutiny levels by the US government in issuing these visas should be seen in the background of higher unemployment levels in the American economy and the political class forced to take certain protectionist measures to drive home the message that they are keen protecting jobs.
However, Raina from Gartner feels that the visa issues between India and US is more of an irritant for the Indian IT industry than as a deal breaker. Mittal says that if one looks at the list of top 15 IT companies in India, majority of them are US-headquartered corporations. This is kind of a remainder of the openness of the Indian economy in accepting more of the outside investments while many of India?s IT companies are now expanding their horizon into the United States.